Question

Suppose that from a new checkable deposit, First National Bank holds 4 million dollars in vault cash, 16 million dollars on deposit with the Federal Reserve, and 18 million dollars in excess reserves. Given this information, we can say First National Bank has ________ million dollars in required reserves.

Answer 1

We can say First National Bank has 2 million dollars in required reserves

Step-by-step explanation:

In order to calculate the required reserves we would have to make the following calculation:

Required reserves = Total reserves - excess reserves = vault cash + deposits with Federal Reserve - excess reserves

vault cash= 4 million dollars

deposits with Federal Reserve= 16 million dollars

excess reserves=18 million dollars

Therefore, Required reserves=4 million dollars+ 16 million dollars-=18 million dollars

Required reserves= 2 million dollars

We can say First National Bank has 2 million dollars in required reserves